Creating Quality Loyalty

Q-Mart clubs prove effective rewards program for Wisconsin retailer

SHEBOYGAN, Wis. -- Join the club. That's what John Winter wants his customers to do. And he has more than 70 clubs to choose from.

The vice president of planning development for the 18-store Q-Mart chain told CSP Daily News that Quality State Oil, Sheboygan, Wis., has had its Q-Mart Rewards program in place for seven years (
read Part 1 of this exclusive interview here). Arranged around a club concept, the rewards program encourages customers to buy a certain number of the same item, such as cups of coffee, and eventually rewards them with a free cup.

Winter shared some of its results in part because the chain is expanding its loyalty program into its 60-site dealer base. To date, the program has grown to more than 70 clubs and speaks to the power of loyalty:

$7 million in new sales since the program began.

80% of all gallons of milk purchased goes through the Q-Mart program.

Its new craft-beer club boosted category sales by 300%.

Targeted offers and cross-promotions can stimulate sales of specific products. As a result, the chain is the biggest area seller for items such as cases of bottled water, family-size bags of chips and frozen pizza.

Its loyalty customers spend $2.50 more than nonloyalty customers.

When a competing store opened up next door, that Q-Mart retained all its loyalty business, but lost 15% of its nonloyalty customers.

Vendor partnerships flourish, fueled by concrete throughput data. Through its partnership with Houston-based CITGO, the program has given away $100,000 in random rewards.

With its loyalty provider, Outsite Networks, Norfolk, Va., Quality State recently started rolling out its rewards program to its 60-store dealer network, calling this version Badger Rewards.

The biggest hurdle is educating store staff, said Scott Stangel, wholesale marketing manager for Quality State. Employees are the front lines of communication to customers. "Building the program requires you to be connected through your sales associates," he said, noting how its mystery-shop bonus programs reward employees for talking up loyalty.

It's an ongoing battle, Winter said. "You have to differentiate yourself and give the consumer the advantage," he said. "Over the years, we've identified winning clubs … and play off of those. We also go in different directions, keeping it interesting for our customers."

Another lesson learned is how to cut costs without negatively affecting the program. In one case, they questioned their practice of giving a free item after a customer spent a certain dollar amount. They moved to a buy-one-get-one-free, mix-and-match approach. The change had no effect on loyalty behavior and cut $150,000 in costs.

In opening its loyalty program to its dealers, Quality State hopes to share its success with its broader network. "If you're not embracing loyalty, you're not going to be around long," Stangel said. "The major players are, so [retailers] have to be flexible and embrace change."